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How Does Ethereum Derive Value

Do Cryptocurrencies Have Intrinsic Value? It Depends

Do Cryptocurrencies Have Intrinsic Value? It Depends

Do Cryptocurrencies Have Intrinsic Value? It Depends By Jake Frankenfield | Updated August 3, 2017 6:38 AM EDT Hydropower: The Key to Bitcoin Mining in the Future? Cryptocurrencies have experienced significant increases in value in the last year. But things have looked less clear in the past few months. As there has been talk of the bubble bursting in the stock market, so too has there been talk of a cryptocurrencybubble pop. Is now a good time to assess the value of cryptocurrencies from a more reasoned perspective? In order to predict cryptocurrencies future value, we should work to understand how value is derived. Value is a measurement of the goodness of a given thing. Some things are instrumental goods, meaning they are goods because they allow us to access some other good. Intrinsic goods are good in and of themselves -- they are the thing we work to attain. Adam Smith said in the Wealth of Nations that money can serve no purpose other than purchasing goods." Currencies are instrumental goods. To be effective, currencies have to bemediums of exchange and stores of value . So, the value of a currency is in its ability to do those things efficiently and effectively: facilitate transactions and act as stores of value. Cryptocurrenciesas Mediums of Exchange and Stores of Value A few years ago, when digital currency was just rising in value, Paul Krugman asked this question, in a blog post titled Bitcoin is Evil. He wrote, to be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why Bitcoin should be a stable store of value. Talking with Bitcoin boosters, Krugman complained, When I try to get them to explain to me why Bitcoin is a reliable store of value, they always come back to with explanati Continue reading >>

How Is The Price Of Ether Calculated?

How Is The Price Of Ether Calculated?

Many people wonder how the price of Ether is calculated, but its important to remember that it works no different than it would with other currencies or objects. Lets first look at how the price of most things are derived - we can use oranges as an example. What is the price of an orange? Well, it depends. As a starting point one would derive the price of an orange based on two things: how much someone is trying to sell it for, and how much another person is trying to buy it for. If John wants to sell it for USD2.50 and Sarah is only prepared to pay USD2.00, there is no deal. But if they agree on a price that works for both, lets say USD2.25, then the transaction will happen. If its winter, there might be more people wanting to buy oranges, so the price will go up. Or if there is a drought the supply of oranges will become less, so more people are trying to buy less oranges, which can also drive the price up. Ether and other currencies are a bit different from oranges in that they are what is called homogeneous - one dollar is identical to another dollar, just as one Ether is the same as another. Oranges on the other hand can vary in size and quality. All this means is that its easier to come up with a price of a currency or Ether: once again, just what buyers and sellers will agree on. Many people might not realise that other currencies work exactly the same - if you are holding a coin or note of your own local currency in your hand, at any given point in time there are millions of people buying and selling your local currency, so while you might observe it as stable, its value actually continuously changes. When you want to exchange it for another currency at a currency desk, lets say for USD, one day you pay 10 local currency to a dollar, the next day maybe 11 or 9. Continue reading >>

Where Do Ethereum Tokens Get Their Value From?

Where Do Ethereum Tokens Get Their Value From?

Where do ethereum tokens get their value from? Where do ethereum tokens get their value from? Bitcoin was the first blockchain, and the leader in a technological revolution. On the back of fundamentals in the underlying technology, a prominent advocate of blockchain, Vitalik Buterin, built a new technology which many are quoting as a decentralised world computer, or the Web 3.0 for short the Ethereum network. The network has its own cryptocurrency known as Ether . However, there is also an option to create a token which can be used to run specifically coded smart contracts. These tokens are generally sold to markets to generate cash, to fund a companys vision via an initial coin offering (ICO), which works in a similar way to an initial public offering (IPO). From here, a new token economy has formed, with people investing and trading these tokens, which sit on the top of the ethereum network. Tokens have value because they have scarcity, and they have utility. They are scarce becausethey have a limited number of tokens available, and theyhave utility because they have an inherent use, in the smart contracts which are built on the Ethereum network. The number of different verticals in the space is astounding. If you can think of it, its probably already being developed somewhere in the world. Online casinos, decentralised exchanges, outsourced computational power sales, micro payments processors, consensus algorithms, and cross chain compatibility tokens are all on the market. This is basically crowd funding on a different level. Individuals arent putting up cash for an equity stake in the same way as they are in an IPO, but rather they are putting up cash for a speculative use case on each company themselves. By analogy, its similar to buying the digital coins (which Continue reading >>

Value Of The Token Model Fred Ehrsam Medium

Value Of The Token Model Fred Ehrsam Medium

Previously co-founder @Coinbase, trader @GoldmanSachs, computer science @DukeU. Since my prior post on app coins (I think the more appropriate term is now tokens or blockchain tokens) weve seen more and more projects use this model. The tide is turning. While over $1bn of venture capital was invested in Bitcoin and blockchain based startups up through 2015, 2016 saw over $100m of crowdsourced, non-venture money fund 60+ projects. As momentum has increased, there have been some intelligent critiques of the model which help to hone in on the value a token really provides. I especially enjoyed these two , where the author argues itd be more efficient to port the smart contracts of a token to use Ether directly, eliminating the token. He argues this will happen because 1) it eliminates the cost to convert between Ether and tokens, and 2) Ether will be a better money than any token because it will be more broadly used, thus more stable, so people will prefer to just use Ether. I want to succinctly describe the core value of the token model and address some of the common critiques below. People will want to have governance over their own communities separate from the global governance of Ethereum (or any other base blockchain). A token is necessary for this sub-governance. Not having sub-governance would be like anyone who owns USD being able to walk into a Google shareholder meeting and voting without owning Google stock just because Google shares happen to be denominated in USD. Or like everyone in the US being able to vote on the bylaws of a social club in San Francisco, just because it happens to exist in the US. A token offers security to community governance. While anyone can buy a token with Ether, in order to meaningfully influence the governance of that token commun Continue reading >>

Eli5 What Gives Ether Value? : Ethereum

Eli5 What Gives Ether Value? : Ethereum

EDIT: I'm not asking why the value of Ether has been growing. I am asking why Ether has value at all/why people are even buying it (other than a quick turn around investment). Many of the comments helped me understand, so thank you! I know Ethereum blockchain is designed different than the BTC blockchain, arguably better. I also know about the big news about large companies like Toyota joining the EEA. But how and why does this affect the current value of buying/selling ether? With bitcoin people are actually using it to buy and sell goods (legal and illegal), and all of that big news about Japan, and the BTC ATMs in China and India. Heck, I paid some Etsy dude for some coffee mugs in BTC. But this isn't happening with Ether. Hopefully my question is clear. And I by no means am trying to poop on ethereum. Just trying to learn. Continue reading >>

What Is Ether?

What Is Ether?

Ether is a necessary element a fuel for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources). If you just want to test the technology, you probably don't need real ether. Download the latest Wallet app and switch to the Test Network Check your ether presale balance safely here: The total supply of ether and its rate of issuance was decided by the donations gathered on the 2014 presale. The results were roughly: 60 million ether created to contributors of the presale 12 Million (20% of the above) were created to the development fund, most of it going to early contributors and developers and the remaining to the Ethereum Foundation 5 ethers are created every block (roughly 15 seconds) to the miner of the block 2-3 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn't included (called uncle/aunt reward) Note that after the Byzantium update is implemented, the mining and uncle reward is reduced to 3 ethers and 0.625-2.625 ethers, respectively. No. According to the terms agreed by all parties on the 2014 presale, issuance of ether is capped at 18 million ether per year (this number equals 25% of the initial supply). This means that while the absolute issuance is fixed, the relative inflation is decreased every year. In theory if this issuance was kept indefinitely then at some point the rate of new tokens created every year would reach the average amount lost yearly (by misuse, accidental key Continue reading >>

Whats The True Value Of Cryptocurrencies?

Whats The True Value Of Cryptocurrencies?

The recent trend in coin offerings, including Tezos massive raise, has put a spotlight on cryptocurrencies. The valuation of the worlds leading crypto currency, Bitcoin exceeded US$ 100 billion recently. Are cryptocurrencies overvalued and due for a correction? Perhaps. In this series (1/3), I will attempt to identify sources of demand of cryptocurrencies and to develop a framework for looking at their value. The source of demand for cryptocurrencies is derived from their attributes as a medium of exchange and that as a store of value. They are not yet useful as a unit of account but that could change. In this post, I will look at the value of cryptocurrencies as a medium of exchange, particularly, as an enabler of the internet of money and the implications of this on their value. The most fundamental use-case of cryptocurrencies is the role they are beginning to play as a medium of exchange on the internet. a. Peer to peer payments (VOIP:Talk:: Cryptocurrencies:Payments) Cryptocurrencies are creating opportunities for a massive scale-up in peer-to-peer payments. Firstly, they can reduce the cost of transactions. They can do this by removing intermediaries and developing a lower-cost consensus system to validate transactions. This is opposed to the centralized trusted payment infrastructure which has always been necessary for transferring value. This layered interaction involving multiple intermediaries adds costs to the transfer of value. Secondly, they can remove friction from transactions creating opportunities for seam-less transfer of value across peers. Come to think of it, the original Paypal innovation of being able to email money was at its heart about making payments frictionless (and secure). In fact, the first killer app for the mainstreaming of cryptocurre Continue reading >>

What Is Ethereum? What Is Ethereum Mining & How Does It Work?

What Is Ethereum? What Is Ethereum Mining & How Does It Work?

What is Ethereum? What is Ethereum Mining? Jordan Tuwiner Last updated July 13, 2017 Ethereum is more than a cryptocurrency. Its an open source shared world computing platform. A world computer that allows for the decentralized verification of transactions for any Turing-viable implementation. Thanks to Ethereum, Blockchain technologies are now easy to employ without having to reinvent the wheel. It is clear that Ethereum grew out of desire to apply Bitcoin/Blockchain concepts to realms outside of money. As a result, it provides open source platform to developers who seek to write decentralized applications. This appeals to developers who seek an easy introduction to Blockchain projects A series of innovative features definite Ethereum. As a result of its extended capabilities, Ethereum comes with two types of accounts . EOA, or Externally Owned Accounts, provide bitcoin-like capabilities such as providing a balance that is secured by private keys. Contract Accounts provide the Turing Complete room for application development that makes the protocol so desirable. These accounts are used as holding objects to constitute Smart-contracts which provide Ethereums capability for accommodating decentralized autonomous organizations; a way of structuring organizations without a vulnerable center. Most importantly, Ethereum capitalizes on the realization that consensus allows for currency and currency allows for consensus by providing economic incentive. As such, verifications are paid for on a pay-per-use basis, a system that replaces mining as we know it from Bitcoin. Ethereum right now uses PoW mining to secure its chain. Vitalik Buterin, the creator of Ethereum, stressed that his idea was fueled by the desire to [Avoid] the swiss-army knife protocol . That is to say that us Continue reading >>

Why Ethereum Has Value ?

Why Ethereum Has Value ?

CEO & Co-Founder at BuyUcoin Blockchain and Cryptocurrency Architect Although there are many cryptocurrencies out there competing with bitcoins to get the market share, none of them is able to challenge Bitcoin but one cryptocurrency out there named Ethereum is able to challenge it & becoming the second most popular crypto in the world. But what is Ethereum and how it is different from Bitcoin? Ethereum is often touted as a "world computer." What that fancy language really means is that ethereum is a platform for the creation of decentralized applications (dapps), using what are known as smart contracts . Smart contracts are bits of code that automatically execute an action after certain requirements have been metsay, sending a slice of an app's profits to investors after a predetermined date has passed. Bitcoin has smart contracts, too, but ethereum makes them really easy to use since they're baked into the system's design. All of this takes place on a blockchain, which bitcoin uses, too. All ablockchain does is act as a public ledger that lists everything that goes on in the network in real-time. It's the tool that makes the whole thing possible. The blockchain, and thus the ethereum network, is distributed across thousands of computers (or "nodes") around the world. It's also "Turing complete," which means that smart contracts on the blockchain can handle most computational functions, allowing them to be pretty sophisticated. For example, say that I want to send my colleague Jordan some money. I would register this contract between myself and Jordan on the blockchain and the ethereum network would automatically facilitate the exchange of money. Since the blockchain is a public ledger, anyone and everyone can see that this transaction happened. You may have heard tha Continue reading >>

What's Ether Worth? A Probabilistic Valuation

What's Ether Worth? A Probabilistic Valuation

Is Ether worth $260+? Should I recommend it as an investment to friends at its current price?These are the questions that have been nagging at me after watching Ether increase 10x in value over the last four months. In March, I first learned about Ethereum. Its coder-friendly smart contracts resonated with me. "This is the next step, a platform for blockchain applications," I murmured during late night research sessions on Epicenter .I emailed tech savvy friends to spread the word. The friendly price helped my recommendations. I told friends to buy Ether (the token underlying the Ethereum blockchain) at $16, $22, $32. I made small, gleeful investments at these prices. My enthusiasm has since been mimicked around the world. The price of Ether broke $50 in April and $200 in May. It now sits at $261, and Ethereums $24 billion market cap is second only to Bitcoins in blockchain. Ethers huge gains are a microcosm. The blockchain space as a whole has experienced a massive influx of capital: from $23 billion in March to $101 billion as of this writing. A broad cross section of the world is excited about the disruption and new capabilities blockchain will create. Before we answer those questions, a little housekeeping. This analysis assumes a basic understanding of blockchain technology, and this IBM article can help. And some Ethereum basics. Ethereum is a distributed protocol (set of software code) running on computers all over the world. Applications running on Ethereum pay gas in Ether to use the platform. For more, read Fred Ehrsam s explanationofwhy Ethereum is the the leading digital asset. It's important to understand that blockchain protocols are a new beast. These assets provide value and have use cases different from gold, fiat currencies, and stocks. Bitcoin has co Continue reading >>

Do Blockchain Tokens Havevalue?

Do Blockchain Tokens Havevalue?

Value is an esoteric concept. When it comes to valuing networks it can become especially convoluted due to its traditionally theoretical nature. Yet blockchains must maintain a sufficient market capitalization to secure the value held within their respective networks. This is easy enough to take for granted when prices are soaring and speculation provides a massive disconnect between the security being provided and the actual need for it, but in a speculative contraction there must be a mathematical reason why a blockchain token is actually useful (as others have highlighted). One of the more popular attempts to value networks is Metcalfes Law. This performs well for information networks where the value of connections increases exponentially according to a constant, but poorly in value networks (like blockchains) where connections are valued at varying degrees. For value networks, I believe Beckstroms Law may provide a better fit. If I wish use my bank to send a wire transfer of $1,000 from Country A to Country B, it will cost $25. If I wish to send $1,000 of Maker Dai from Country A to Country B, the cost will be $.05 (the approximate cost of a value transfer on Ethereum at the time this was written). Plugging this into Beckstroms formula: In this instance, value added to a single user by the network is $24.95. Multiply this by 100M transactions/year and the net benefit to users of the network is $2.95B. However, the benefit to the network itself is only $5M. The other half of Beckstroms formula factors security into the cost of using the network. This has been an Achilles heel for almost any scenario where the internet is used to store real value. What is brilliant about blockchains is that, in the context of Beckstroms security function, the benefit to the network o Continue reading >>

How Ethereum Became The Platform Of Choice For Icod Digital Assets

How Ethereum Became The Platform Of Choice For Icod Digital Assets

How Ethereum became the platform of choice for ICOd digital assets Jason Rowley is a venture capital and technology reporter for Crunchbase News . For most of the history of blockchain-based currencies and assets, the story has been all about Bitcoin. At a market capitalization of around $40 billion, it remains the most valuable cryptocurrency . But with the rise of a new chain on the ahem block, namely Ethereum , and new ways to fund the development of new crypto-platforms with ICOs, the narrative is shifting somewhat to the entire cryptographic asset class . Today, lets take a more in-depth look at some of the historical trends in the digital currency space, paying close attention to Ethereum and its role as the platform of choice for new cryptographic assets. The number of new digital assets is on the rise In roughly the past 12 months, the number of cryptocurrencies listed on CoinMarketCap.com , a main reference site for digital asset developers and speculators alike, has increased significantly. Below is a chart compiled from the count of cryptocurrencies listed on historic snapshots of the sites main table starting with the first snapshot on April 28, 2013 (featuring a whopping seven cryptocurrencies) and the most recent snapshot from June 4, 2017 . As of the June 4 snapshot, there were 809 cryptocurrencies and other digital assets listed on the main CoinMarketCap page. As ofMonday, June 5, 2017, at around 6:00 PM Central time, there were 857 cryptocurrencies and assets listed on the site. Between January 3, 2016 the first snapshot of 2016 and June 5, 2017, the number of cryptographic assets listed on CoinMarketCap grew from 551 to 857, an increase of about 56 percent in almost exactly 18 months. As the chart shows, the pace of growth in the number of crypto-back Continue reading >>

How Is Ethereum Different From Bitcoin?

How Is Ethereum Different From Bitcoin?

{{article.article.images.featured.caption}} Opinions expressed by Forbes Contributors are their own. The author is a Forbes contributor. The opinions expressed are those of the writer. This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe Answer by Samantha Radocchia , Emerging Technologies Entrepreneur and Scholar, on Quora : The Primary Difference Between Ethereum And Bitcoin: A Beginners Guide Todays hype surrounding Bitcoin, Ethereum, cryptocurrency, and blockchain technologies rivals the dot-com bubble in the 90s. There is a lot of money pouring into this space, and it doesnt seem to be slowing down anytime soon. Unfortunately, while the masses may be able to say, Yeah, Ive heard of Bitcoin, a large percentage of people still arent quite sure what it isand are even more confused about Ethereum. If youre even remotely interested in this space, consider this your beginners guide. The easiest way to define Bitcoin is to call it a digital dollar. Thats really all it isminus all the formal regulations that come with a bank (which is what makes it such a disruptive concept). Its not a technology. Its not a company. Its your money, held in a digital form. Anyone can create an account to buy and sell Bitcoin through websites like Coinbase. The price of Bitcoin then fluctuates based on supply and demand. However, now people are beginning to convert their Bitcoin into what are called tokens, which companies issue during an ICO, or Initial Coin Offering, which allows people to invest in a company by purchasing tokens with their Bitcoin. Based on the supply and demand of those tokens, their price (just like a share of stock after a company holds an Initial Public Offering, otherwise known as an IPO) goes up Continue reading >>

How Do People Give Value To Cryptocurrency And How Is The Price Of Cryptocurrency Defined? | Bitconnect

How Do People Give Value To Cryptocurrency And How Is The Price Of Cryptocurrency Defined? | Bitconnect

Precious metals gain their value/perceived value due to their utility and limited supply, and price is often tied to supply/demand. Supply/Demand is a simple economic factor that affects the price of many things. In some countries Bitcoin and other cryptocurrencies is classed as an asset, in others as a currency. Bitcoin, for example has a maximum of 21 million whole units, divisible 100 million times. With over 7 billion people on the planet, if even 1 billion were to adopt Bitcoin, 21 million whole units would not spread very far without a significant price tag. The supply is also bought in at a constant rate and is unchangeable due to the coconscious rules. This creates a supply that is limited, and thus people will pay more to get the coins they think have value. Block reward halvings, like the Bitcoin halving of 2016 caused the price to slowly increase as the halving approached, due to the reduced supply of new incoming coins imminent. This can affect the price of many cryptocurrencies, but in the case of Litecoin, did not even make a major dent in the price. The energy put into securing blockchains can be intensive. In the case of proof of work (POW) blockchains which are the most popular form, electricity usage can be intense. In the case of Bitcoin, the blockchain uses as much energy securing it at present as a small country uses. This has a factor on the price, as it takes a certain amount of energy on average to mine one Bitcoin. This goes up with difficulty increases. The more secure the blockchain and the higher the mining difficulty , the higher the perceived value and price and the harder the coins are to get through mining. This can have an impact on price and ties in with the energy usage above, in the case of proof of work blockchains such as Bitcoin a Continue reading >>

What Investors Should Know Before Trading Ether - Coindesk

What Investors Should Know Before Trading Ether - Coindesk

What Investors Should Know Before Trading Ether Given the increasing prominence of the idea blockchain tech will impact enterprise business, both retail investors and investment institutions are optimistic the market could soon develop into a vibrant new asset class. However, to date, there have been few alternative digital assets that have offered a value proposition that differs from that of bitcoin, the oldest publicly traded blockchain-based cryptocurrency. Today, bitcoin appeals to investors with both a high tolerance for risk and those who believe the digital currency could one day become a stable store of value and financial rail competitive in global commerce. Though often cited as volatile, bitcoins market remains one of the more stable among digital currencies, with a market cap today in excess of $7bn at press time. Many alternative digital currencies, in turn, have offered a similar value proposition, and comparably more pronounced volatility. Amid this landscape, ether, a currency transacted through the Ethereum platform, is perhaps emerging as a contender for more adventurous portfolios. Despite a recent slump in price, ether volume has seen strong growth as more global exchanges add the asset to their offerings. Ether provides unique benefits not offered by alternative digital currencies, including bitcoin, but it also comes with its own set of risks and considerations. Interested investors can benefit from learning the basics of ethereum, as well as the key variables that influence ethers price movements. A platform for decentralized applications, Ethereum was inventedby Vitalik Buterin and announced in early 2014 . At the time, Buterin indicated in public appearances he was keen to createan alternative blockchain-based system that would offer a superio Continue reading >>

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